Here is a copy of my tribute on your 80th birthday. I am sending a copy to James as I asked him to present it. I hope you like it.
If there is anything inappropriate, let me know.
I'm sorry I cannot make it but I am still limping around on my gammy leg.
I leave it to James to dance at your party, I know he is good at it.
With love to you both from Penny and myself
In Praise of Stanislav Menshikov; A Tribute on his 80th Birthday
I first met Stanislav in Moscow in May 1964, when I visited the Institute of World Economy (IMEMO). He was Deputy director of a brilliant and sophisticated team analysing the performance of capitalist economies, with particular emphasis on US-USSR comparisons. I had worked in OEEC-OECD for eleven years previously as head of the economics division, analysing the driving forces of growth in western capitalist economies. My interaction with the IMEMO economists was very congenial and productive. There was an exchange of ideas on techniques of comparison using PPP adjustments which OEEC had developed, and adjusting for differences between national income measurement according to western and Soviet MPS concepts. I discovered that there were Russian translations of OEEC publications on these topics. The director, Manoukian, had my first book (Economic Growth in the West, 1964) translated into Russian. So there was an exciting exchange of ideas, particularly with Stanislav. We were kindred spirits, had very similar interests, were both 37 years old, and at the same stage in our careers. Stanislav spent his childhood in England, spoke English fluently, had a great sense of humour which livened up a conversation on almost any topic. I discovered that he was a dedicated scholar, meticulous in garnering evidence for his conclusions. He had a more detailed knowledge of how capitalists operate than most western economists. His first book, (Millionaires and Managers, 1964) was based on detailed scrutiny of company reports, interviews he had with American tycoons, such as Henry Ford II, David Rockefeller and Cyrus Eaton and with dozens of vice-presidents of corporations.
Stanislav became a professor and director in the Academy of Sciences at Akademgorodok near Novosibirsk in 1970-74, building econometric models. In 1975, he published The Economic Cycle: Postwar Developments. This was a scholarly analysis of the post-war cyclical experience of the USA, Western Europe and Japan, and a history of econometric modelling. In 1974-80 he was Director of Planning and Projections in the UN secretariat in New York. Here he deepened his econometric analysis of the world economy in liaison with Nobel laureate Laurence Klein. Since then he has published many books and articles on business cycles, long waves, and econometric models, more recently with his wife Larissa.
From 1980 to 1986 he was a high official in the International Affairs Department of the Party secretariat in the Kremlin, working on relations with capitalist countries and the UN. Since then he has worked as an independent journalist and academic living in Prague, Rotterdam and Amsterdam. In 1988, he published a wide-ranging dialogue with John Kenneth Galbraith, Capitalism. Communism and Coexistence about the prospects for capitalism, socialism and peaceful coexistence. In the same year, he published his first James Bond style detective story, The Jonnson Files followed up in 1996 with The Kremlin Diamonds. He has not yet sold the movie rights!
His main concern since the 1980s has been with the performance of the Russian economy. The Soviet Economy Catastrophe or Catharsis, was a severe critique of the perestroika policies of Gorbachev. He argued that the “Soviet state bureaucracy had increasingly fused with the ‘shadow economy’ to form a new mechanism of fraud, theft and economic disruption’’ which would lead to a collapse of living standards. He put forward his own alternative policy program to avoid catastrophe. The book appeared in Russian in 1990, before the disintegration of the USSR, and in English in 1991, after the Yeltsin takeover.
Menshikov’s forebodings were justified. The Yeltsin transition to a market economy by shock therapy did have catastrophic results. Between 1990 and 1998, Russian GDP fell by 46 per cent. Fixed investment fell precipitously. The fall in consumption was milder, but the reform process increased the instability of economic life with major short-term fluctuations in consumer purchasing power, big increases in inequality between persons and regions, and a large increase in poverty at the bottom of the income scale. Consumer prices rose at an annual rate of 387 per cent from 1990 to 1998. It was difficult to devise and implement a new tax structure in an economy where the legal system was so murky. Enterprises had rapidly become adept at tax avoidance, tax evasion, concealment of profits at home and large scale capital flight to foreign tax havens. Since the 1998 devaluation, Russia has experienced rapid growth. GDP has risen nearly 7 per cent a year. The GDP level is still below that of 1990, but personal consumption and export earnings have risen rapidly.
Menshikov’s latest book, The Anatomy of Russian Capitalism, (2007 in the English edition) is a masterly analysis of the nature of Russian capitalism under Vladimir Putin. It is meticulously documented, with fascinating description of the careers of the leading oligarchs, and a detailed quantification of what has happened to key industries. Under Yeltsin, ownership of key sectors came into the hands of banking and financial oligarchs. Government turned into a management committee for the oligarchs’ affairs and there was no market competition. Under Putin, governmental control over the oligarchs has been reasserted and the state has taken direct control of the media and the energy industries. Yukos, Sibneft and some foreign investments have been renationalised, but the degree of concentration of personal wealth has not waned. It is much bigger than in the USA. In Russia 50 companies account for 90 per cent of the market value of shares listed on Russian stock exchanges; in the USA, 500 companies account for 63 per cent of market capitalisation. Private capital is invested primarily in export-oriented industries which yield super-profit, but not in manufacturing. There is excessive monopolisation of the economy yielding too high a share for profit and too low a share of labour income. The 50 richest people in Russia own companies in the oil, non-ferrous metals, steel, coal, iron ore copper, chemical feedstuffs, natural gas and cement industries. They did not establish the enterprises they own, but acquired them at cut-rate prices when state-owned enterprises were privatised. “They represent an amazingly unproductive generation of businessmen, but appear incapable of moving to the forefront of technological progress”. “The shadow economy, organised crime and corruption at all levels of government are certainly overdeveloped”. As there is insecurity on how long their luck will last, oligarchs keep substantial assets abroad and are reluctant to take a long term view on new investment in Russia. They do not delegate decisions on production to managers as is the case in the USA. In Menshikov’s view, Russian capitalism is caught in a vicious circle-overconcentration on the fuel and raw materials industries and underdevelopment of the domestic market, due to poverty on a mass scale. He urges policy moves to reduce the share of gross profit (which has been about 40 per cent of GDP), and raise the share of labour income from 44 per cent to something like the 58 per cent prevailing in the USA.
Stanislav’s career has been one of high productivity, with bold ambition in many fields, and great integrity in his search for evidence. He has immense stamina and self confidence, and his output has not flagged with age. We have been friends for 43 years of mutual affection and respect.